Integrated reporting: Spanish companies show progress but still lag behind some of their European peers

24 Jun 2014

A survey of Spanish companies in the IBEX 35 shows that most are making progress in integrated reporting. The advance has been particularly significant with regard to communicating the company strategy and describing the environment in which the company operates, as well as references to the organisation’s business model. But despite the advance in the past two years, there is still room for improvement in integrated reporting for IBEX 35 companies.

The survey assessed each company against the International Integrated Reporting Council’s IR framework, which focuses on the content, quality and level of integration in the following areas:

Description of the organisation and its environment/context

Strategy and resource allocation

Business model

Risks and opportunities

Future perspectives

Governance

Key performance indicators

The framework aims to help companies ‘tell their story’ in a concise and articulate way, so that investors and other stakeholders can understand the means of value creation now and into the future.

According to the survey, Spanish IBEX 35 companies’ reporting outstrips many of their European peers. Fifty-seven percent of Spanish companies effectively communicate their strategy, compared to 24% last year and 60% go beyond simply providing strategic information and manage to articulate or align their reporting according to the company’s priorities and objectives. In addition, 74% of them make references to the environment they operate.

But whilst Spanish companies in the IBEX 35 are getting better at describing their wider operating environment and overarching strategy for creating value, they still struggle, according to the survey, to integrate that information across the report– for example, linking the strategy to the business model with insightful detail. In other markets such as UK, the regulation promotes the incorporation of various aspects of integrated reporting in corporate reports (such as the business models or the company's risks).

There are clear opportunities for further work to demonstrate the value that Spanish companies create, as well as specific challenges for the future. “There are five major areas for improvement” said María Luz Castilla, Corporate Reporting partner at PwC. “Spanish companies need to talk more about the risks that they face; they need to communicate clearly how their corporate governance creates value; they need to measure their progress against strategic objectives and use that to develop their vision for the future more coherently. Finally, they need to de-compartmentalise their reporting. It is still too focused on merely complying with legal requirements and this is restricting communication of both value and value creation, as well as stifling innovation in how Spanish companies tell their stories.”